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Play like the big boys: Investment 101

Recently, a Capital Region resident was disturbed when his local bank held an out-of-state check, worth $15,000 for his small business, for more than two weeks. "Where was the money?" asked this local businessman? The funds had been deducted from the sender's account 10 days ago. The bank refused to say.

Dollars are precious...don't let banks invest your money.
Photo by Andrew Burton

Simply, the bank was investing its customer's money in a short-term investment.

Lesson? We must become investors, too, and beat the banks.

Bulls & Bears – Investment Basics The biggest difference between investing and saving is how much time and risk are involved. Investments typically represent a long-term commitment and are a great way to grow your money for long-term goals. They might have more risk, but they also have more earning potential. Savings accounts, however, are much more accessible for fulfilling short-term goals.

Here’s what you need to know to get started: Investment 101

  • Low-risk investments such as CDs generally fall into the “savings account” category. CDs and savings accounts are FDIC insured up to $250,000. Some higher-risk (and therefore higher return) investments are as follows:
  • Bonds Government bonds can be purchased online. The money is not insured, but is fully backed by the U.S. government. Corporate bonds are less safe, but usually pay higher interest rates. Bonds range from less than a year up to 30 years.
  • Mutual Funds A mutual fund is an opportunity for you, together with many other investors, to pool your money. Professional money managers invest the “pool” for you, keeping the investments under constant supervision. The money managers use their knowledge of securities and changing market conditions to invest the pooled assets in many different companies within a variety of industries.
  • Collectibles If you choose to collect, realize that there’s no way to be sure items in your collection will increase in value over time.

A good rule of thumb when considering investments is to invest in companies you are familiar with. Work with a professional investment advisor (many will give you free upfront counseling).

Dave Balog teaches financial essentials to families in the Capital Region. (518) 952-1257.

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